Securities Lawyer 101 l Brenda Hamilton

Monday, April 14, 2014

U.S. Indicts Carribbean Money Laundering Operators

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced on March 24, 2014. The indictment alleges that Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud. The Caribbean-based defendants allegedly assisted undercover law enforcement agents, posing as U.S. clients, in laundering purported criminal proceeds through an offshore structure.

According to the FBI, the transactions were designed to conceal the true identity of the proceeds’ owners. Vandyk and St-Cyr invested the laundered funds on the clients’ behalf and represented the funds would not be reported to the U.S. government.

The indictment was returned in the Eastern District of Virginia on March 6, 2014, and unsealed on March 12, 2014, when all three defendants were arrested in Miami, Fla. In addition to the conspiracy charge, Vandyk, St-Cyr and Poulin were each charged with two counts of money laundering.

“These charges result from an extensive investigation and are the latest demonstration of the Department’s resolve to find and prosecute those who aid money laundering and tax fraud globally,” said Deputy Attorney General James M. Cole.

According to the indictment, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based in the Cayman Islands. St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens. Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada and in the Turks and Caicos. His clientele also included numerous U.S. citizens.

According to the indictment, Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government. Vandyk and St-Cyr directed the undercover agents posing as U.S. clients to create offshore foundations with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients. Vandyk and St-Cyr used the offshore entities to move money into the Cayman Islands and used foreign attorneys as intermediaries for such transactions.

According to the indictment, Poulin established an offshore foundation for the undercover agents posing as U.S. clients and served as a nominal board member in lieu of the clients. Poulin transferred wire payments from the offshore foundations to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside the United States in the name of the offshore foundation. The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients. Clients were able to monitor their investments online through the use of anonymous, numeric passcodes. Upon request from the U.S. client, Vandyk and St-Cyr would liquidate investments and transfer money, through Poulin, back to the United States. According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.

“I commend IRS Criminal Investigation and the Division’s prosecutors for the extraordinary work that they have done over many months in this investigation,” said Assistant Attorney General Kathryn Keneally for the Tax Division. “In particular, it is important to note that the IRS’s voluntary disclosure policy excludes disclosures after the government has received information about taxpayers’ identities. If the investigation team now has the names of account holders who have not yet come forward, time has run out for them.”

“As alleged in the indictment, these defendants were in the business of creating layers of transactions so their US clients could launder criminal proceeds,” said Chief of IRS-Criminal Investigation Richard Weber. “IRS Criminal Investigation is committed to unraveling complex financial and money laundering schemes and holding those accountable for creating mechanisms to hide assets offshore and dodge the tax system.”

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, each defendant faces a maximum potential sentence of 20 years in prison for each count.